Brazil tries to calm international lenders by both word and deed

By
Jacqueline Reditt, Special to The Christian Science Monitor /
June 11, 1984

Brasilia

Brazil will not renege on its foreign debt repayments and there will not be a ''debtor's cartel'' in Latin America. That, at least, is the message sent out by Brazil to worried international lenders.

The fear that Latin American countries might join forces in a rare show of solidarity and suspend payments on their external debts was voiced when Brazil, Mexico, Colombia, and Argentina signed a letter last month protesting increased international interest rates. They also agreed to hold a meeting of Latin American debtor nations.

The letter called for more access to the markets of the industrialized countries and improved repayment terms for the region's foreign debt. The fear grew when Bolivia declared a virtual moratorium on its foreign debt repayments May 31, followed four days later by Ecuador, announcing that it had suspended payment of both principal and interest on part of its foreign debt for a period of 19 months.

Brazil's foreign minister, Ramiro Saraiva Guerreiro, finance minister, Ernane Galveas, and planning minister, Antonio Delfim Netto, huddled together last week to update Brazil's policy and to try to fix a date for the proposed meeting with Mexico, Argentina, and Colombia.

The four nations, joined by Peru and Venezuela, sent letters to the leaders of the seven industrial countries at the London summit, calling for ''a constructive dialogue among creditor and borrower countries to identify specific measures for the relief of the debt burden.''

Meanwhile, Brazilian Foreign Minister Guerreiro has tried to allay fears that Brazil will follow Bolivia and Ecuador's example and suspend or default on its payments. In an interview with a Brazilian magazine, he said, ''Brazil, like the other debtor countries, has not the slightest intention of swindling its creditors.

''The idea of a debtors' club being a way to avoid paying their creditors is not in the spirit of the Brazilian government, nor I believe, of other Latin American countries.''

Following his meeting with Galveas and Delfim Netto, Guerreiro again told the press, ''Brazil will pay all.''

What Brazil hopes will result from the meeting and the letters is a more sympathetic consideration of the plight of the Latin American debtor countries and - more concretely - renegotiation of the debts to provide easier repayment terms over a longer period and with ''more realistic'' interest rates.

Brazil's most convincing argument in new negotiations will be its encouraging economic performance in the first quarter of 1984.

In a report issued at the end of May, Brazil's Central Bank president, Affonso Celso Pastore, said, ''The results in both the internal and external spheres surpassed our most optimistic expectations.''

The report said that tight monetary and fiscal policies were beginning to pay off in the battle against inflation, which slowed down in March and April.

Pastore's report said external improvements were even more encouraging: A trade surplus of $2.5 billion almost offset net service payments of $2.8 billion. This resulted in a current account deficit of only $300 million, compared with $2.9 billion in the first quarter of 1983.

Coupled with the inflow of new foreign financial resources, this gave the balance of payments a surplus of approximately $2.7 billion - $1 billion more than forecast earlier.

In spite of this, Brazil's economy is still heavily burdened by the servicing of its foreign debt, which is more than $90 billion.

Pastore commented in his report that ''the recent increase in international interest rates is a worrisome aspect''. This is something of an understatement.

Guerreiro, while stressing Brazil's intention to honor its debt, defined more accurately the sentiment among Latin American debtor countries: ''Things cannot be tolerated as they are for much longer,'' he said.

''The debtor countries cannot just accept a situation in which it is impossible for them to pay off what they owe.'' They need ''space to breathe.''